Scottish Court of Session Decisions

OUTER HOUSE, COURT OF SESSION [2010] CSOH 05
A336/09	OPINION OF LORD BANNATYNE in the cause MARION RENATE RODEWALD Pursuer; against MRS ELIZABETH TAYLOR Defender: ­­­­­­­­­­­­­­­­­________________

Pursuer: Francis; Wright & Crawford

Defender: D Campbell; Bonar Mackenzie, WS

18 January 2011

Introduction
[1] This matter came before me for procedure roll discussion at the instance of the defender.

Background
[2] The action sought payment by the defender to the pursuer of a sum of money which had been paid by tenants ("the BBC") of a property known as "Corshellach" to the defender and which had been retained by her. The basis upon which the rental payments were sought by the pursuer was that the defender had in terms of a contract been acting at the relevant time as agent for the pursuer in relation to the letting of Corshellach. It was accordingly alleged that she had received said rental payments in a fiduciary capacity. In these circumstances she was not entitled to retain the said sum but was bound to pay it to the pursuer.

Submissions for the defender
[3] The first branch of the defender's argument was based on the first plea-in-law on behalf of the defender which was all parties not called.

[4] Counsel began by outlining the circumstances in which such a plea may be successful. He referred me to Macfadyen, Court of Session Practice, page D/105 which contained a recent and concise summary of the law:

Such a plea

"may only be sustained where all parties whose appearance, or failure to appear, is necessary to have the question at issue effectively disposed of have not been called. The point of the plea is that there are other persons who have not been called and whose absence will prejudice the defender, either in his defence, or in his position (by way, for example of relief or contribution) after his defence has been repelled."

He also referred me to Maxwell, The Practice of the Court of Session at 193 and MacLaren, Court of Session Practice at 381 which contained observations in similar terms to the above.

[5] On turning to the record, counsel generally submitted that throughout the record there was repeated reference to Mr Nagy (the defender's husband) in relation to agreements regarding Corshellach.

[6] In particular he referred to article 2 of Condescendence where the pursuer averred that when Corshellach was tenanted the defender and her husband Mr Nagy occupied Glenwood and that the defender and Mr Nagy paid no rent for such occupation: (see pages 5 and 6 of the Record).

[7] It was further averred that in consideration for such rent-free occupation in terms of the parties' agreement the defender was to let and collect rents for Corshellach. It was submitted that the pursuer was thus averring that the consideration for the defender and Mr Nagy occupying Glenwood was the rental of income from Corshellach (see page 6 of the Record).

[8] In article 3 of Condescendence the pursuer averred that the defender and Mr Nagy knew monies received as rent from the letting of Corshellach were to be remitted to the pursuer (see page 10 of the Record).

[9] Further, in article 3 of Condescendence the pursuer admitted that she did not ask the defender to account for rent received but goes on to aver that she made requests for payment of rent to Mr Nagy and in particular did so in January 2003 (see page 11 of the Record).

[10] Then, towards the end of article 3 of Condescendence in responding to the defender's answers it was averred that it was the arrangement among the parties that the defender and Mr Nagy should have rent free accommodation in Glenwood and that both the defender and Mr Nagy were told monies received as rents for Corshellach required to be remitted to the pursuer and that the pursuer reiterated this requirement to Mr Nagy in January 2003 (see pages 11 and 12 of the Record). Accordingly counsel submitted that on the basis of the pursuer's averments Mr Nagy was involved as a beneficiary under the agreement and was being informed of the obligation that needed to be fulfilled under the agreement, namely remit of the rental income to the pursuer.

[11] On the basis of the foregoing averments it was submitted by counsel that Mr Nagy was a person who was an interested party in the arrangements regarding Corshellach and who may be accountable to the pursuer for rental income received. Moreover it was counsel's position that looking to the pursuer's whole averments the factual matrix surrounding the alleged contract of agency between the pursuer and defender was most unclear. However, on one possible reading Mr Nagy was a party thereto. He had not been called as a defender in this action.

[12] It was counsel's submission that in those circumstances it was clear that it was necessary for Mr Nagy to be a party to the action in order for the questions at issue to be effectively disposed of.

[13] Counsel then submitted that the defender was prejudiced by Mr Nagy not being called as, on the basis of the pursuer's averments he was party to, or at least aware of the alleged agreement, allegedly received benefit from such agreement and was made aware by the pursuer of their being accountability for the rental income received. Mr Nagy's appearance or failure to appear therefore was necessary to effectively dispose of the issue of the alleged obligation of the defender to account for rent received.

[14] It was counsel's position that if it were argued that any prejudice to the defender could be answered by the availability of third party procedure to the defender then this was not an answer to the plea of all parties not called. He submitted that the onus should not lie on the defender to bring in Mr Nagy as a third party. He indicated that particular difficulties would be caused to the defender in seeking to follow such a course given that she was legally aided.

[15] The second broad branch of the defender's argument was to the effect that the pursuer's averments were lacking in specification.

[16] He first argued that it was wholly unclear what the contract was that was said to form the basis of the claim that the defender was an agent for the pursuer. It was his position that looking to the whole averments it was unclear as to whether one or more than one agreement was being referred to therein. It was wholly unclear as to who the parties were to any agreement or agreements. It was wholly unclear when the contract or contracts said to be the foundation of the defender's obligation as agent were entered into. It was his position that the pursuer's case was based on contract and that it was therefore incumbent on the pursuer to properly specify the contract upon which she was founding. In his submission she had entirely failed to do so and therefore the defender was materially prejudiced in her preparation of her case and in her ability to reply to the pursuer's averments. It was critical that full and proper averments in relation to the basis of the claim should be made.

[17] There was a third branch to the defender's argument and this was based on her fifth plea-in-law of prescription. Counsel, however, advised me that having considered the position he did not believe that at this stage the plea of prescription could in fact be argued and accordingly he submitted that if I were not with him in relation to his motion that the case should be dismissed in terms of the first two branches of his argument then I should reserve the prescription plea and the averments supporting it.

The submissions on behalf of the pursuer
[18] Counsel for the pursuer began his submissions by seeking to amend the record by deleting the phrase at the opening of article 3 of Condescendence: "Pursuant to such oral agreement".

[19] It was his position that with that amendment it was made clear that whatever other obligations or agreements may be put in issue on record, payment is sought on the basis of a fiduciary relationship based on agency and that the agreements averred are merely background.

[20] The motion to amend was opposed by counsel for the pursuer who submitted that this proposed amendment did not cure the defects in the pursuer's pleadings but rather, made the pursuer's position even more opaque. I decided to reserve my position as to whether to allow the proposed Amendment until after I had taken this matter to Avizandum and had had an opportunity to consider the pleadings in detail and the various submissions thereon made by both parties. I will deal with this issue when I turn to my discussion.

[21] Counsel for the pursuer continued by observing that the case which the defender had to meet was on the averments crystal clear, namely: she had a fiduciary obligation based on agency to account for the rental. He argued that it was clear from the nature of the defender's answers that she understood the nature of the case that was made against her. There was no question of there being any lack of specification on the part of the pursuer and he had nothing further to add in relation to the argument based on specification put forward on behalf of the defender.

[22] Turning to the defender's argument based on all parties not called, he did not dispute the law as set out by counsel for the defender.

[23] However, it was his position that there was no reason for the pursuer to make Mr Nagy a party to the action in that she had no reason to suppose that she had an arguable case against him.

[24] He submitted that the onus was on the defender to put forward averments that Mr Nagy was a co-obligant and it would only be if such averments were made that the pursuer would be required to consider making Mr Nagy a second defender. His stance was that the pleadings on behalf of the defender came nowhere near establishing that Mr Nagy was a co-obligant. He submitted that the defender's averments did not go beyond Mr Nagy having some vague interest in the proceedings. The defender's averments did not go as far as to say that Mr Nagy was knowingly in receipt of trust funds or that he was a knowing party in the misapplication of trust funds.

[25] In advancing this line of argument counsel particularly relied on the case of Lang v Ure 1994 SLT 1235. In that case:

"An architect sued two individuals for fees allegedly due to him for professional services. On 3 December 1987 the pursuer had been instructed by the first defender and his then partner, who resigned from the partnership on 28 June 1988. On 5 July 1988 the first defender introduced the second defender to the pursuer as his new 'co-director'. The second defender was the pursuer's main contact. The defenders argued that all instructions given to the pursuer were given in the defenders' capacity as partners in a joint adventure. As two partners in the joint adventure had not been called as defenders, all parties to the action had not been called and the action should be dismissed. The defenders accepted that they required to prove that the joint and several obligation was owed to him in addition by the two other partners. The pursuer contended that he had never received instructions from either of these partners and that all instructions were issued by the two defenders."

It was held by Lord Milligan:

"(2) that the allegation that there were co-obligants other than the defenders was made by the defenders and denied by the pursuer and a pursuer was not bound to call as a defender a party or parties alleged by the existing defenders to be co-obligants where, to the best of the pursuer's belief, he had no sound right of action against any proposed additional defender (p 1236G-I); and defenders' pleas of all parties not called and specifying the additional parties to be called repelled."

Counsel took from this case that there was a pleading obligation placed on the defender which required to be discharged for any argument based on all parties not called to get off the ground. As he had already submitted it was his position that this pleading obligation had not been satisfied by the defender.

[26] Moreover, counsel argued that given the availability of third party procedure to the defender, she could not establish prejudice. In advancing this submission he again relied on the decision in Lang v Ure in which Lord Milligan had held:

"(1) that the plea of 'all parties not called' was based on prejudice to the defenders and such prejudice no longer existed having regard to the availability of third party procedure (p 1236F) and G-H)."

[27] As regards the prescription argument he agreed with the approach of the defender's counsel that the issue should be reserved.

[28] His motion was that the case should be sent to proof before answer leaving all averments and pleas standing.

Discussion
[29] I would intend to look at the issues raised in the course of the argument before me in the order that they were approached by counsel for the pursuer and therefore I would intend to look first at the issue of lack of specification.

[30] I begin by reminding myself that such a plea finds its proper application in a case where the defender does not know the case against him and objects to being taken by surprise at the proof. It is necessary for such a plea to be successful that the party insisting upon it can show prejudice arising from the way in which the case is pled.

[31] The pursuer's case is that the defender was acting in terms of a contract as agent for her in letting the property known as Corshellach to the BBC from March to August 2002; March to August 2003 and March to August 2004. That this is the case sought to be put forward on behalf of the pursuer is perhaps most clearly set out in the pursuer's first plea in law:

"The defender having contracted with the pursuer as agent to let certain subjects and make over to her the rents thereof and having thereby got such rents as a fiduciary to the order of the pursuer is bound to make over to the pursuer the same."

[32] The defender's position in reply is a short one, namely that at no time did she enter into an agreement whereby she was to act as the pursuer's agent in relation to the letting of Corshellach (see: answer 3, page 13 of the Record).

[33] In a case based on contract, as this case is said to be based, in order to give fair notice to a defender of the case made against that party, it requires the pursuer to aver the essentials of the contract which in my view are as follows:

(a) who the parties are to the alleged contract;

(b) where the contract was entered into;

(c) when the contract was entered into;

(d) the terms of the contract; and

(e) the form of the contract.

[34] Having regard to the averments made on behalf of the pursuer in my clear view she wholly fails to specify sufficiently such matters. She thus fails to aver sufficiently the foundation of her case.

[35] Article 2 of Condescendence commences with a series of averments about a meeting in January 2002 involving the pursuer, her husband, the defender and Mr Nagy at Corshellach. At lines 10-12 at page 5 the following averment appears as to the result of the meeting: "The decision that the pursuer should purchase Corshellach was resolved amongst all of those present in Corshellach at the end of January 2002."

[36] There are then various further averments about said meeting including an averment that the defender indicated that Corshellach might be let to the BBC and that thereafter it was tenanted.

[37] After these averments at line 22 and 23 of page 5 of the Record the following averment appears: "As agent for the pursuers the defender secured the letting of Corshellach to the BBC."

[38] The above averment comes entirely out of the blue. It is not averred how the defender became agent for the pursuers (plural rather than singular). It is not in particular averred that it was as the result of a contract being entered into between the pursuer and the defender. It is wholly unclear whether it is being said that a contract was entered into at this meeting in late January 2002 whereby the defender became the pursuer's agent in relation to this matter. It is wholly unclear with whom it is alleged that the defender contracted to become agent. Was it with the pursuer alone or was it with the pursuer and her husband? The averments to that point had involved the pursuer and her husband and the defender and Mr Nagy. What was the position of Mr Nagy in relation to this contract? In my view this is a question of some relevance and importance given all the averments at page 5 in relation to this meeting in late January 2002 and the involvement of Mr Nagy in these meetings. What are the terms of this agency contract? There are no averments at all as to what the terms of the contract are, nor are there any averments as to the form in which the contract was entered into. If it was not at the meeting in late January 2002 that the defender contracted with the pursuer to become agent when was this contract entered into and where was it entered into? None of these questions is in my view capable of being answered by reference to the pursuer's averments. In my judgment by the end of page 5 of the Record there are no proper averments made by the pursuer in relation to the contract of agency upon which the pursuer's case is founded.

[39] As article 2 continues at page 6 the position regarding the agency contract becomes even more unclear. At page 6, lines 7-11 the following averment appears:

"It was separately agreed amongst the pursuer, Mr Rodewald, the defender and Mr Nagy that the expenses associated with and of maintaining Corshellach were to be met by the defender and Mr Nagy using funds paid by the pursuer and Mr Rodewald into the defender's mother's bank account."

Then at lines 12-16 the following averments are made:

"In terms of the parties' agreement Mr Nagy, was to and did meet the expenses associated with Corshellach. In terms of the parties' agreement the defender as agent was to make over to the pursuer the rents so collected by paying such rent into the pursuer's account."

[40] From these averments it is unclear as to whether it is being said on behalf of the pursuer that it was in terms of this separate agreement that the defender was acting as agent. This would seem to follow given that the averment relating to her acting as agent follows on immediately from the reference to this separate agreement and the reference to Mr Nagy's obligation arising from this separate agreement. However, the position is very unclear. Is the separate agreement in any way connected with the earlier agreement? This is not clear. Again Mr Nagy appears to be a party to this separate agreement. The question arises who are the parties to whatever is said to be the agreement or agreements which are referred to in the pleadings at pages 5 and 6? In my opinion the averments at page 6 are entirely opaque. How they fit in with the averments at page 5 is wholly unclear. The only thing that is certain by this point in the record is that there remains a complete and utter lack of specification of the contract of agency upon which the pursuer's claim is based.

[41] Turning to article 3 of condescendence in my judgment the averments therein are of no assistance to the defender in understanding the pursuer's position. If anything the pursuer's position as regards the core of her case, namely the contract of agency, becomes even more mystifying.

[42] The pursuer sought to delete the following words at the start of article 3 of the Condescendence: "Pursuant to such oral agreement".

[43] I am not prepared to allow this proposed amendment as in my judgment it makes the pursuer's position no clearer and it therefore cannot be in the interests of justice to allow the amendment. If anything it makes the pursuer's position more difficult to understand.

[44] This is one of only two points in her averments at which the pursuer avers the form of the agreement which the defender is said to have entered into with the pursuer, namely: that it was an oral agreement. I do not see how the deletion of this particular averment causes the pursuer's case to become any clearer. It might be thought that where reference to an oral agreement has been deleted that therefore the contract is founded on a written agreement. However, there is no reference to such a written contract in the pursuer's averments.

[45] I equally am unable to understand why given the pursuer's position that the agency was created by a contract the pursuer should now wish to delete an averment which is to the effect that pursuant to such oral agreement the defender secured short term contracts for the occupancy of Corshellach. I do not understand why counsel wished to delete this averment and in the course of his submissions to me he never made it clear why he believed it answered the argument put forward on behalf of the defender.

[46] I accordingly refuse to allow the proposed Amendment.

[47] Reading further in article 3, page 11, line 19, there is the following averment:

"The arrangement amongst the parties was that the defender and Mr Nagy should have rent free accommodation in Glenwood."

[48] Again the averred position is of an agreement involving more than the pursuer and defender and in particular including Mr Nagy. Again, what appears to be being referred to is a single agreement. Earlier in this Opinion I observed that in article 2 of Condescendence it appeared on the basis of the averments that there was more than one agreement. It is not clear to me which agreement is being referred to here.

[49] Then at lines 22-24 there is this averment:

"At or about the time when the defender first secured the letting of Corshellach from the BBC she agreed orally with the pursuer that she would remit the rents to the pursuer."

Given this averment, one asks the question is this another agreement separate from those referred to in article 2 of Condescendence or is it one or other of those two agreements? Is this the agreement which is said to set up the relationship of agency? These matters are entirely unclear.

[50] Having regard to the whole of the pursuer's averments I am of the view for the above reasons that there is a complete lack of specification as regards all of the essentials of the contract of agency. It is impossible to identify the parties to the agreement; the terms of the agreement; the date of the agreement; and where the agreement was entered into. In these circumstances I am of the view that the pursuer's case is wholly lacking in specification as regards material issues. In my view, were this matter to continue the defender would be materially prejudiced. In my view the pursuer's averments are completely lacking in clarity and are almost impossible to understand. From the terms of pursuer's first plea-in-law this should be a simple matter to aver on record. That simple case has in my view not been averred. It is no answer to the lack of specification plea that the defender knows this is a case based on agency. I accept the defender knows this is the alleged position and denies this. However, critically what is missing are the necessary averments of the contract which gave rise to the agency. Counsel in the course of his reply said that the agreements averred on record were no more than background. With that submission I wholly disagree. This is a case said to be based on contract and thus at the forefront of the case must be the averments as regards that contract. There are no such proper averments. Thus the defender does not know what she is facing. In the course of the debate before me I sought to indicate to counsel for the pursuer that I had certain concerns in relation to the clarity of the pursuer's case and about the specification in relation to the contract. However, counsel at no point, other than to the very limited extent to which I have earlier referred, offered to amend and rather insisted that there were sufficient averments on record. I do not agree with this submission for the reasons which I have set out.

[51] My decision in relation to the issue of lack of specification means that I do not require to go further and to consider the issue of all parties not called. I have dealt with the issue of lack of specification first in that it appeared to me that it was very much inter-related with the issue of all parties not called. It appeared to me that the lack of clarity within the pursuer's pleadings made it very difficult to decide whether the plea of all parties not called was well-founded. On one view of the pleadings the plea may have been well-founded. However, the pleadings were so unclear that I could not form a proper view on this branch of the defender's argument.

Decision
[52] For the foregoing reasons I sustain the defender's second plea-in-law; repel the pursuer's pleas-in law and dismiss the action. I was not addressed on the issue of expenses.